You want to run the following OLS regression on 1006 monthly observations using the five Fama-French...

   

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You want to run the following OLS regression on 1006 monthly observations using the five Fama-French factors at time t as independent variables and the excess return on American Express at time t as the dependent variable: RAmEx,t = 3₁+ B₂ Rt + B3 SMB, +34 HML + 85 RMW+ + 36 CMA+ + AmEx,t and come up with the following parameter estimates and t-statistics: RAmEx,t = -0.1722 (-0.5684) RM.t 1.4942 (20.7780) +0.1102 RMW, (0.8087) - 0.2921 SMB + 0.4854 HMLt (-0.0046) (3.5411) 0.0486 CMA, (-0.2287) The residual sum of squares (RSS₁) is 22864, the R² 0.4859, the F-statistic 98.6576, and the corresponding p-value 0.0001. (a) What do the t-statistics tell you about the statistical significance of each individual parameter estimate at the 5% significance level? Explain your line of thought step-by- step for 82. Based on your results, which of the Fama-French factors would you remove from the above regression? (13 points) your line of (12 points) (b) What do the F-statistic and the corresponding p-value tell you? Explain thought step-by-step for a significance level of 5%. You want to run the following OLS regression on 1006 monthly observations using the five Fama-French factors at time t as independent variables and the excess return on American Express at time t as the dependent variable: RAmEx,t = 3₁+ B₂ Rt + B3 SMB, +34 HML + 85 RMW+ + 36 CMA+ + AmEx,t and come up with the following parameter estimates and t-statistics: RAmEx,t = -0.1722 (-0.5684) RM.t 1.4942 (20.7780) +0.1102 RMW, (0.8087) - 0.2921 SMB + 0.4854 HMLt (-0.0046) (3.5411) 0.0486 CMA, (-0.2287) The residual sum of squares (RSS₁) is 22864, the R² 0.4859, the F-statistic 98.6576, and the corresponding p-value 0.0001. (a) What do the t-statistics tell you about the statistical significance of each individual parameter estimate at the 5% significance level? Explain your line of thought step-by- step for 82. Based on your results, which of the Fama-French factors would you remove from the above regression? (13 points) your line of (12 points) (b) What do the F-statistic and the corresponding p-value tell you? Explain thought step-by-step for a significance level of 5%.